**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **WASHINGTON,
        D.C. 20549**
  
 **FORM
        10-Q**
  
 **(Mark
        One)**
 **x**
              **Quarterly
                  report under Section 13 or 15(d) of the Securities Exchange Act of
                  1934****For
                the
                quarterly period ended September 30, 2008****OR**
  **o**
              **Transition
                  report under Section 13 or 15(d) of the Securities Exchange Act of
                  1934****For
                the
                transition period from________to_________**
  **Commission
        File No. 000-52954**
  
 **TONGLI
        PHARMACEUTICALS (USA), INC.**
 **(Exact
        Name of Registrant as specified in Its Charter)**
  
 **DELAWARE**
              
              **84-1090791****(State
                  or other jurisdiction of**
                **incorporation
                  or organization)**
              
              **(I.R.S.
                  Employer**
                **Identification
                  No.)**
 
 **125
        Maiden Lane, Suite 309, New York, NY 10038**
 **(Address
        of principal executive offices)**
 
 **(212)797-9877**
 **(Issuer’s
        telephone number, including area code)**
 
 Check
        whether the registrant (1) filed all reports required to be filed by
        Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
        such shorter period that the registrant was required to file such reports);
        and
        (2) has been subject to such filing requirements for the past 90
        days.
 
 Yes x No  o
 
 Check
        whether the registrant is a large accelerated filer, an accelerated filer,
        or a
        non-accelerated filer.
 
 Large
                  accelerated filer  o    Accelerated
                  filer  o     Non-accelerated
                  filer  o Smaller
                  reporting companyx
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
 
 Yes  o    No x
 
 The
        number of shares outstanding of each of the issuer’s classes of equity as of the
        latest practicable date is stated below
  **Title
                  of each class of Common Stock**
              
              **Outstanding as of September 30, 2008**Common Stock, $0.001 par value
              
              10,033,216
  
 **PART
                    I – FINANCIAL INFORMATION**
                
                1**ITEM 1
                    – FINANCIAL STATEMENTS**
                
                1**ITEM 2
                    – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
                    OF****OPERATIONS**
                
                10**ITEM 3
                    – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
                    RISK**
                
                18**ITEM 4
                    – CONTROLS AND PROCEDURES**
                
                18**PART
                    II – OTHER INFORMATION****ITEM 1
                    – LEGAL PROCEEDINGS**
                
                19**ITEM 1A
                    – RISK FACTORS**
                
                19**ITEM 2
                    – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
                    PROCEEDS**
                
                19**ITEM 3
                    – DEFAULTS UPON SENIOR SECURITIES**
                
                19**ITEM 4
                    – SUBMISSION OF MATTERS TO A VOTE OF SECURITY
                    HOLDERS**
                
                19**ITEM 5
                    – OTHER INFORMATION**
                
                19**ITEM 6
                    – EXHIBITS**
                
                19


**Part
        I – FINANCIAL INFORMATION**
 
 **ITEM
        1 – FINANCIAL STATEMENTS**
 
 **TONGLI
        PHARMACEUTICALS (USA), INC.**
 
 **CONSOLIDATED
        BALANCE SHEETS**
 
 SEPTEMBER 30,
                2008
              
              MARCH 31,
                2008(Unaudited)**ASSETS****CURRENT
                  ASSETS:**Cash
              
              $
              127,388
              
              $
              130,630Trade
                  accounts receivable, net
              
              
              12,775
              
              
              2,470Inventories
              
              
              34,051
              
              
              11,172Prepaid
                  expenses
              
              
              22,023
              
              
              -Refundable
                  deposits
              
              
              10,976
              
              
              405,643Advances
                  to suppliers
              
              
              900,226
              
              
              678,654**TOTAL
                  CURRENT ASSETS**
              
              
              1,107,439
              
              
              1,228,569**PROPERTY
                  AND EQUIPMENT, NET**
              
              
              7,228,756
              
              
              7,813,779**CONTRACT
                  DEPOSIT**
              
              
              1,025,514
              
              
              -**TOTAL
                  ASSETS**
              
              $
              9,361,709
              
              $
              9,042,348**LIABILITIES
                  AND SHAREHOLDERS' EQUITY****CURRENT
                  LIABILITIES:**Note
                  payable - bank
              
              $
              1,009,216
              
              $
              995,168Accounts
                  payable
              
              
              713,207
              
              
              959,382Due
                  to related parties
              
              
              544,356
              
              
              819,620Accrued
                  expenses and other sundry current liabilities
              
              
              279,243
              
              
              90,893**TOTAL
                  CURRENT LIABILITIES**
              
              
              2,546,022
              
              
              2,865,063**COMMITMENTS
                  AND CONTINGENCIES****SHAREHOLDERS'
                  EQUITY:**Preferred
                  stock, $0.001 par value, Authorized 1,000,000 shares; none
                  issued
              
              
              -
              
              
              -Common
                  stock, $0.001 par value, Authorized 200,000,000 shares Issued and
                  outstanding - 10,033,216 shares and 9,963,216,
                  respectively
              
              
              10,033
              
              
              9,963Additional
                  paid-in capital
              
              
              6,585,093
              
              
              7,092,663Accumulated
                  other comprehensive income
              
              
              1,109,169
              
              
              955,288Accumulated
                  deficit
              
              
              (888,608
              )
              
              (1,880,629
              )**TOTAL
                  SHAREHOLDERS EQUITY**
              
              
              6,815,687
              
              
              6,177,285**TOTAL
                  LIABILITIES AND SHAREHOLDERS' EQUITY**
              
              $
              9,361,709
              
              $
              9,042,348
  The
        accompanying notes are an integral part of these financial
        statements.
  1
  **TONGLI
        PHARMACEUTICALS (USA), INC.**
 
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME**
 **(UNAUDITED)**
  FOR THE THREE MONTHS
                ENDED SEPTEMBER 30,
              
              FOR THE SIX MONTHS ENDED
                SEPTEMBER 30,2008
              
              2007
              
              2008
              
              2007**REVENUE**
              
              $
              1,645,540
              
              $
              413,034
              
              $
              3,310,710
              
              $
              773,574**COST
                  OF SALES,**including
                  depreciation****and amortization of $4,111, $9,296****$85,901 and $27,769, respectively
              
              
              926,819
              
              
              235,890
              
              
              1,896,959
              
              
              444,724**GROSS
                  PROFIT**
              
              
              718,721
              
              
              177,144
              
              
              1,413,751
              
              
              328,850**OPERATING
                  EXPENSES:**General
                  and administrative
              
              
              164,551
              
              
              37,741
              
              
              304,596
              
              
              77,748Research
                  and development
              
              
              10,175
              
              
              -
              
              
              10,175
              
              
              -Depreciation
                  expense
              
              
              42,807
              
              
              72,037
              
              
              85,155
              
              
              138,204Selling
                  expense
              
              
              20,613
              
              
              11,557
              
              
              36,188
              
              
              14,226TOTAL
                  OPERATING EXPENSES
              
              
              238,146
              
              
              121,335
              
              
              436,114
              
              
              230,178**OPERATING
                  INCOME**
              
              
              480,575
              
              
              55,809
              
              
              977,637
              
              
              98,672**OTHER
                  EXPENSE (INCOME):**Interest
                  expense
              
              
              51,839
              
              
              28,385
              
              
              86,916
              
              
              49,007Rental
                  income
              
              
              (58,300
              )
              
              -
              
              
              (101,300
              )
              
              -**NET
                  INCOME**
              
              
              487,036
              
              
              27,424
              
              
              992,021
              
              
              49,665**OTHER
                  COMPREHENSIVE INCOME:**Foreign
                  currency translation adjustment
              
              
              7,763
              
              
              83,066
              
              
              153,881
              
              
              144,903**COMPREHENSIVE
                  INCOME**
              
              $
              494,799
              
              $
              110,490
              
              $
              1,145,902
              
              $
              194,568BASIC
                  AND DILUTED INCOMEPER
                  SHARE
              
              $
              0.05
              
              $
              -
              
              $
              0.10
              
              $
              0.01
  The
        accompanying notes are an integral part of these financial
        statements.
  2
  **TONGLI
        PHARMACEUTICALS (USA), INC.**
 
 **CONSOLIDATED
        STATEMENT OF SHAREHOLDERS’ EQUITY**
 
 **FOR
        THE SIX MONTHS ENDED SEPTEMBER 30, 2008**
 
 **(UNAUDITED)**
  AccumulatedOtherCommon Stock
              
              Additional
              
              Comrehensive
              
              AccumulatedShares
              
              Amount
              
              Paid
                  in capital
              
              Income
              
              Deficit
              
              TotalBalance
                  April 1, 2008
              
              
              9,963,216
              
              $
              9,963
              
              $
              7,092,663
              
              $
              955,288
              
              $
              (1,880,629
              )
              $
              6,177,285Effects
                  of reverse merger
              
              
              
              
              
              
              
              
              (525,000
              )
              
              
              
              
              
              
              
              (525,000
              )Stock
                  issued for services
              
              
              70,000
              
              
              70
              
              
              17,430
              
              
              
              
              
              
              
              
              17,500Foreign
                  currency translation adjustment
              
              
              
              
              
              
              
              
              
              
              
              153,881
              
              
              
              
              
              153,881Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              992,021
              
              
              992,021Balance
                  September 30, 2008
              
              
              10,033,216
              
              $
              10,033
              
              $
              6,585,093
              
              $
              1,109,169
              
              $
              (888,608
              )
              $
              6,815,687
  The
        accompanying notes are an integral part of these financial
        statements.
  3
  **TONGLI
        PHARMACEUTICALS (USA), INC.**
  **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **(UNAUDITED)**
 
 FOR THE SIX MONTHS ENDED
                SEPTEMBER 30,2008
              
              2007**OPERATING
                  ACTIVITIES:**Net
                  income
              
              $
              992,021
              
              
              49,665Adjustments
                  to reconcile net income to net cash provided by operating
                  activities:Depreciation
                  and amortization
              
              
              171,452
              
              
              165,973Bad
                  debt
              
              
              13,354
              
              
              12,276Stock
                  issued for services
              
              
              17,500
              
              
              -Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              (23,659
              )
              
              (14,242
              )Inventories
              
              
              (22,879
              )
              
              (101,130
              )Prepaid
                  expenses
              
              
              (22,023
              )
              
              (107,607
              )Advances
                  to suppliers
              
              
              (221,572
              )
              
              (62
              )Accounts
                  payable
              
              
              (246,175
              )
              
              320,175Accrued
                  expenses and other sundry current liabilities
              
              
              188,350
              
              
              21,341**NET
                  CASH PROVIDED BY OPERATING ACTIVITIES**
              
              
              846,369
              
              
              346,389**INVESTING
                  ACTIVITIES:**Acquisition
                  of property and equipment
              
              
              (661
              )
              
              (417,118
              )Refund
                  of deposits related to terminated acquistions
              
              
              394,667
              
              
              (79,669
              )Contract
                  deposit
              
              
              (1,025,514
              )
              
              -Portion
                  of cost of Aim Smart acquisition paid by the Company
              
              
              (276,000
              )
              
              -**NET
                  CASH USED IN INVESTING ACTIVITIES**
              
              
              (907,508
              )
              
              (496,787
              )**FINANCING
                  ACTIVITIES:**Payment
                  of bank loans, net
              
              
              (7,899
              )
              
              (12,087
              )Proceeds
                  from related party advances
              
              
              64,622
              
              
              176,977**NET
                  CASH PROVIDED BY FINANCING ACTIVITIES**
              
              
              56,723
              
              
              164,890**EFFECTS
                  OF EXCHANGE RATE ON CASH**
              
              
              1,174
              
              
              (11,317
              )**(DECREASE)
                  INCREASE IN CASH**
              
              
              (3,242
              )
              
              3,175**CASH
                  BEGINNING OF YEAR**
              
              
              130,630
              
              
              1,986**CASH
                  END OF YEAR**
              
              $
              127,388
              
              $
              5,161**Supplemental
                  disclosures of cash flow information:**Cash
                  paid for:Interest
              
              $
              71,916
              
              $
              49,007Income
                  taxes
              
              $
              -
              
              $
              -**Noncash
                  transactions:**Reduction
                  of related party debt in connection with terminated construction
                  project
              
              $
              588,886
              
              $
              -Portion
                  of cost of Aim Smart acquisition paid on behalf of the Company
                  by the
                  Company's Chairman
              
              $
              249,000
              
              $
              -
 
 The
        accompanying notes are an integral part of these financial
        statements.
  4





**TONGLI
      PHARMACEUTICALS (USA), INC.**





**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**






**1.**
            **BUSINESS
                  DESCRIPTION AND SIGNIFICANT ACCOUNTING
                  POLICIES** ***Organization
        and business description***





Tongli
      Pharmaceuticals (USA), Inc. (“TP” or the “Company”) through a wholly-owned
      subsidiary, Harbin Tianmu Pharmaceuticals Co., Ltd. (“HTP”), develops, produces
      and sells a wide variety of Chinese drugs and healthcare products in The Peoples
      Republic of China (“PRC”). TP was formerly known as American Tony
      Pharmaceutical, Inc. (‘American Tony”). The name change became effective on
      October 30, 2008 and was done to better represent the origin and ongoing
      business of the Company.





On
      August
      12, 2008, American Tony completed a reverse merger with Aim Smart Corporation
      (“Aim Smart”), a dormant public shell. Under
      the
      terms of the merger agreement, the former American Tony shareholders exchanged
      their shares for Aim Smart shares so that, upon the closing of the merger,
      the
      former American Tony shareholders owned 96.7% of the outstanding shares of
      Aim
      Smart. Aim Smart changed its name to American Tony prior to the change to TP.
      For accounting purposes, the Company became the surviving entity and Aim Smart
      became the surviving entity for legal purposes. Accordingly, the accompanying
      financial statements include the assets, liabilities and operations of the
      Company. The
      Company acquired its controlling interest in Aim Smart for a cost of $525,000.
      This interest was aquired solely to effectuate the reverse merger and was paid
      for with $276,000 of its own funds and a $249,000 loan from the Company’s
      Chairman. The cost of the Company’s acquisition of Aim Smart was charged to
      additional paid in capital at the time of the merger.





American
      Tony was incorporated on November 17, 2006 in the state of Delaware and has
      had
      no significant operations since its inception. HTP was formed under laws of
      Peoples Republic of China (“PRC”) on November 26, 1999. In February 2007,
      American Tony acquired HTP through a recapitalization transaction which was
      accomplished through the exchange of shares with HeiLongjiang Tongli Technology
      Co., Ltd. (“TT”), a wholly-owned company located in the PRC.





HTP
      has a
      GMP (Good Manufacturing Practices for Pharmaceutical Products) certificate,
      10
      Drug Register License and “Drug Production Certificate” from the State Drug
      Administration of PRC. The Company’s main products are a cholesterol reduction
      pill, mouthwash, an anti-inflammatory tablet and a calcium supplement. The
      products are sold through distributors and directly to customers; no service
      is
      provided after sales are made. Our customers are drug stores and hospitals
      located in China.





***Basis
      of presentation***





The
      consolidated financial statements include the accounts of the Company and all
      of
      its subsidiaries.  All significant inter-company accounts and transactions
      have been eliminated. These financial statements have been prepared in
      conformity with accounting principles generally accepted in the United States
      of
      America. The functional currency of TT and HTP is the Chinese Renminbi (RMB).
      The accompanying financial statements include the financial statements of
      foreign subsidiaries that have been translated and presented in United States
      dollars (USD).





***Unaudited
      Interim Financial Statements*** ******





The
      accompanying interim consolidated financial statements are unaudited and have
      been prepared in accordance with the rules and regulations of the Securities
      and
      Exchange Commission. Accordingly, they may not include all of the information
      and footnotes required by accounting principles generally accepted in the United
      States of America for complete financial statements. The unaudited interim
      consolidated financial statements have been prepared on the same basis as the
      audited consolidated financial statements and, in the opinion of management,
      reflect all adjustments consisting of normal recurring accruals considered
      necessary to present fairly the Company's financial position, results of its
      operations and cash flows. The results of operations for the three and six
      months ended September 30, 2008 are not necessarily indicative of the results
      that may be expected for the year ending March 31, 2009. These interim unaudited
      consolidated financial statements should be read in conjunction with the audited
      financial statements and accompanying notes for the years ended March 31, 2008
      and 2007 included in our Form 8-K filed with the Securities and Exchange
      Commission on July 30, 2008.


5




***Uses
      of estimates in the preparation of financial
      statements***





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements and
      the reported amounts of net revenue and expenses during each reporting period.
       Actual results could differ from those estimates.





***Cash
      and Cash Equivalents***





The
      Company maintains cash with financial institutions in the Peoples Republic
      of
      China (“PRC”) which are not insured or otherwise protected.  Should any of
      these institutions holding the Company’s cash become insolvent, or if the
      Company is unable to withdraw funds for any reason, the Company could lose
      the
      cash on deposit with that institution.




Cash
      and
      cash equivalents include cash in hand and cash in time deposits with original
      maturities of three months or less.





***Inventories***





Inventories
      are stated at the lower of cost, determined using the weighted average cost
      method, and net realizable value.  Costs include materials, labor and
      manufacturing overhead.  Net realizable value is the estimated selling
      price, in the ordinary course of business, less estimated costs to complete
      and
      dispose.





***Advances
      to Suppliers***





The
      company makes advances to certain vendors for purchase of its material. The
      advances to suppliers are interest free.





***Property
      and equipment***





Property
      and equipment are recorded at cost.  Depreciation is provided in amounts
      sufficient to amortize the cost of the related assets over their useful lives
      using the straight line method for financial reporting purposes.





HTP
      obtained the right to use a parcel of land on which its office and production
      facilities are situated.  Pursuant to the contract from the local
      government of the PRC, the contract expires in 2051.




Maintenance,
      repairs and minor renewals are charged to expense when incurred.
 Replacements and major renewals are capitalized.





***Impairment
      of Long Lived Assets***





The
      Company accounts for the impairment of long-live assets in accordance with
      Statement of Financial Accounting Standards No. 144. “ *Accounting
      for the Impairment or Disposal of Long-Lived Assets* ”.
       Long-lived assets are reviewed for impairment when circumstances indicate
      the carrying value of an asset may not be recoverable.  For assets that are
      to be held and used, impairment is recognized when the estimated undiscounted
      cash flows associated with the asset or group of assets is less than their
      carrying value.  If impairment exists, an adjustment is made to write the
      asset down to its fair value, and a loss is recorded as the difference between
      the carrying value and fair value.  Fair values are determined based on
      quoted market values, discounted cash flows or internal and external appraisals,
      as applicable.  Assets to be disposed of are carried at the lower of
      carrying value or estimated net realizable value. Based on its review, the
      Company believes that, as of September 30, 2008, there were no significant
      impairments of its long-lived assets used in operations.


6





***Deferred
      income taxes***





The
      Company accounts for income taxes in accordance with Statement of Financial
      Accounting Standards No. 109 (SFAS 109") which requires that deferred tax assets
      and liabilities be recognized for future tax consequences attributable to
      differences between financial statement carrying amounts of existing assets
      and
      liabilities and their respective tax bases.  In addition, SFAS 109 requires
      recognition of future tax benefits, such as carry-forwards, to the extent that
      realization of such benefits is more likely than not and that a valuation
      allowance be provided when it is more likely than not that some portion of
      the
      deferred tax asset will not be realized.





***Currency
      translation***





Since
      the
      Company operates primarily in the PRC, the Company’s functional currency is the
      Chinese Yuan (”RMB”).  Revenue and expense accounts are translated at the
      average rates during the period, and balance sheet items are translated at
      year-end rates.  Translation adjustments arising from the use of differing
      exchange rates from period to period are included as a separate component of
      shareholders’ equity.  Gains and losses from foreign currency transactions
      are recognized in current operations.





The
      RMB
      is not freely convertible into foreign currency and all foreign exchange
      transactions must take place through authorized institutions. No representation
      is made that the RMB amounts could have been, or could be, converted into USD
      at
      the rates used in translation.





***Fair
      value of financial instruments***





Statement
      of Financial Accounting Standards No. 107, “ *Disclosures
      about Fair Value of Financial Instruments”* ,
      requires that the Company disclose estimated fair values of financial
      instruments. The Company’s financial instruments primarily consist of cash and
      cash equivalents, accounts receivable, other receivables, advances to suppliers,
      accounts payable, accrued expenses and other sundry current liabilities and
      related party advances and borrowings.





As
      of the
      balance sheet dates, the estimated fair values of financial instruments were
      not
      materially different from their carrying values as presented on the balance
      sheet.  This is attributed to the short maturities of the instruments and
      that interest rates on the borrowings approximate those that would have been
      available for loans of similar remaining maturity and risk profile at the
      respective balance sheet dates.





***Revenue
      Recognition***





Revenue
      is recognized at the date of shipment to customers when a formal arrangement
      exists, the price is fixed or determinable, the delivery is completed, and
      no
      other significant obligations of the Company exist and collectibility is
      reasonably assured.  Payments received before all of the relevant criteria
      for revenue recognition are satisfied are recorded as advances from
      customers.





***Income
      (loss) per common share***





Basic
      income (loss) per common share amounts are computed by dividing net income
      (loss) by the weighted-average common stock shares outstanding during the
      period.  Diluted income (loss) per common share are calculated using
      weighted-average common stock shares outstanding, adjusted for the dilutive
      effect of shares issuable upon the assumed exercise of common stock equivalents.
       As of September 30, 2008 and 2007 there were no common stock equivalents
      outstanding.


7





***Comprehensive
      income***





Comprehensive
      income is defined to include all changes in equity except those resulting from
      investments by shareholders and distributions to shareholders.  Among other
      disclosures, all items that are required to be recognized under current
      accounting standards as components of comprehensive income are required to
      be
      reported in a financial statement that is presented with the same prominence
      as
      other financial statements.  Comprehensive income includes net income and
      the foreign currency translation gain, net of tax.





***Statement
      of Cash Flows***





In
      accordance with Statement of Financial Accounting Standards No. 95,
“ *Statement
      of cash Flows* ,”
cash
      flows from the Company’s operations are calculated based upon the local
      currencies. As a result, amounts related to assets and liabilities reported
      on
      the statement of cash flows will not necessarily agree with changes in the
      corresponding balances on the balance sheet.





***Segment
      reporting***





Statement
      of Financial Accounting Standards No. 131 (“SFAS 131”), *“Disclosure
      about Segments of an Enterprise and Related Information* ”
      requires use of the “management approach” model for segment reporting.  The
      management approach model is based on the way a company’s management organized
      segments within the company for making operating decisions and assessing
      performance.  Reportable segments are based on products and services,
      geography, legal structure, management structure, or any other manner in which
      management disaggregates a company.  SFAS 131 has an immaterial effect on
      the Company’s financial statements, as the Company consists of one reportable
      business segment.  All revenue is from customers in the PRC.
 Substantially all of the Company’s assets are located in the
      PRC.





***New
      Accounting Pronouncements***





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      (SFAS) No. 157, “ *Fair
      Value Measurements* ”
(SFAS
      157).  This statement defines fair value, establishes a framework for
      measuring fair value in generally accepted accounting principles, and expands
      disclosures about fair value measurements. We
      adopted the provisions of SFAS 157 on April 1, 2008. SFAS 157 is applicable
      whenever another accounting pronouncement requires or permits assets and
      liabilities to be measured at fair value. SFAS 157 does not expand or require
      any new fair value measures; however the application of this statement may
      change current practice. In February 2008, the FASB decided that an entity
      need not apply this standard to nonfinancial assets and liabilities that are
      recognized or disclosed at fair value in the financial statements on a
      nonrecurring basis until fiscal years beginning after November 15, 2008.
      Accordingly, our adoption of this standard in 2008 was limited to financial
      assets and liabilities. The
      adoption of SFAS No. 157 did not have a material effect on the results of
      operations, cash flows or financial position of the Company.





In
      February 2007, the FASB issued FASB Statement No, 159, “ *The
      Fair Value Option for Financial Assets and Liabilities*  *-
      including an amendment of FASB Statement No. 115”* (FAS
      159).  FAS 159 became effective for the Company on April 1, 2008.
 This standard permits companies to choose to measure many financial
      instruments and certain other items at fair value and report unrealized gains
      and losses in earnings.  The Company elected not to adopt the fair value
      option for valuation of those assets and liabilities which are eligible under
      this statement and therefore there was no impact to the Company’s results of
      operations, cash flows or financial position.





In
      December 2007, the FASB issued SFAS No. 141(R), *Business Combinations* ,
      and
      SFAS No. 160, *Non-controlling Interests in Consolidated Financial Statements* .
       SFAS 141 (R) requires an acquirer to measure the identifiable assets
      acquired, the liabilities assumed, and any non-controlling interest in the
      acquiree at their fair values on the acquisition date, with goodwill being
      the
      excess value over the net identifiable assets acquired.  SFAS No. 160
      clarifies that a non-controlling interest in a subsidiary should be reported
      as
      equity in the consolidated financial statements.  SFAS No. 141 (R) and SFSS
      No. 160 are effective for financial statements issued for fiscal years beginning
      after December 15, 2008.  Early adoption is prohibited.  The Company
      has not yet determined the effect on its financial statements, if any, upon
      adoption of SFAS No. 141 (R) or SFAS No. 160. SFAS 141 (R) will significantly
      affect the accounting for future business combinations and the Company will
      determine the accounting as new combinations are determined.


8





EITF
      Issue 07-1, *Accounting for Collaborative Arrangements Related to the Development and
      Commercialization of Intellectual Property* is
      effective for financial statements issued for fiscal years beginning after
      December 15, 2008.  This issue addresses the income statement
      classification of payments made between parties in a collaborative arrangement.
       The adoption of EITF 07-1 is not expected to have a significant impact on
      the Company’s results of operations, cash flows or financial
      position.




**2.**
            **GOING
                CONCERN**





As
      noted
      in the accompanying financial statements at September 30, 2008, the Company
      has
      a deficiency in working capital of $1,438,583 and is in default on its bank
      loan
      of $1,009,216.  The uncertainties caused by these conditions raise
      substantial doubt as to the Company’s ability to continue as a going concern.
      The consolidated financial statements do not include any adjustments that might
      result from the outcome of this uncertainty.





The
      Company is currently profitable and is exploring various alternatives to improve
      its financial position and continue to meet its obligations. Management is
      focusing on improving its operations and seeking additional debt and/or equity
      financing. The Company is attempting to negotiate new terms with the bank and,
      as of September 30, 2008, the bank has not taken any action against the
      Company. There can be no assurance that any of these efforts will be
      fruitful.





**3.**
            **INVENTORIES**





As
      of
      September 30, 2008 and March 31, 2008, inventories consist solely of finished
      goods.





**4.**
            **REFUNDABLE
                DEPOSITS**





The
      principal shareholder of the Company entered into various agreements in an
      effort to expand the Company’s business.  Those agreements required
      deposits which were refundable if the transactions were not completed.  As
      of September 30, 2008, approximately $395,000 of such deposits have been
      refunded since certain of these agreements did not close.





**5.**
            **PROPERTY
                AND EQUIPMENT**





A
      summary
      of property and equipment and the estimated lives used in the computation of
      depreciation and amortization is as follows:





SEPTEMBER 30,
              2008
            
            MARCH 31, 2008
            
            LIFEBuilding
            
            $
            7,083,023
            
            $
            6,914,476
            
            
            40
                yearsRight
                to use land
            
            
            393,867
            
            
            412,669
            
            
            50
                yearsMachinery
                and equipment
            
            
            1,018,574
            
            
            993,946
            
            
            10
                yearsOffice
                equipment
            
            
            16,035
            
            
            15,398
            
            
            5
                yearsVehicle
            
            
            98,994
            
            
            96,638
            
            
            5
                yearsConstruction
                in progress
            
            
            -
            
            
            588,886
            
            
            -8,610,493
            
            
            9,022,013Accumulated
                depreciation and amortization
            
            
            1,381,737
            
            
            1,208,234$
            7,228,756
            
            $
            7,813,779




Through
      March 31, 2008, the Company advanced $588,886 (RMB 4,135,724) to Harbin Tianmu
      Real Estate Development Co. Ltd., an entity owned by the Chairman of the
      Company. These advances were in connection with a proposed expansion of the
      Company’s manufacturing facilities to a new facility to be constructed in
      Yichun, China. In September 2008, management decided not to build this facility
      and the advances were repaid by offsetting such amounts against existing related
      party loans to Harbin Tianmu Real Estate Development Co. Ltd.




**6.**
            **CONTRACT
                DEPOSIT**





Contract
      deposit represents a payment under an agreement to acquire patent rights
      pertaining to a formula for a nutraceutical product. The Company’s ability to
      conclude this acquisition and ultimately commercialize this product requires,
      among other things, additional assistance from the seller and obtaining
      government approvals.





**7.**
            **RELATED
                PARTIES**





Related
      party loans consist of the following:





SEPTEMBER 30,
            
            MARCH 31,2008
            
            2008Harbin
                Tianmu Real Estate Development Co. Ltd. (a)
            
            $
            (252,965
            )
            $
            (619,297
            )Chairman
                of the Company (a)
            
            
            (267,750
            )
            
            (136,109
            )US
                Hua Sky International Investment LLC. (b)
            
            
            (13,900
            )
            
            -Family
                members related to the Company's Chairman (c)
            
            
            (9,741
            )
            
            (64,214
            )$
            (544,356
            )
            $
            (819,620
            )





(a)
      These
      loans are due on demand and bear interest at 7% per annum.


(b)
      The
      Company has a month to month sub-lease arrangement for its New York office
      with
      a company owned by its Chairman. The monthly rental is $4,000 and is the same
      as
      the amounts incurred by the related entity. This arrangement began on March
      1,
      2008.


(c)
      This
      loan bears interest at 7.6% per anuum and $54,705 was repaid in May
      2008.





In
      June
      2008, the Company issued 70,000 shares of common stock to two newly appointed
      independent directors.





**8.**
            **NOTE
                PAYABLE - BANK**





This
      note
      bears interest at 8.19% per annum and is due on demand.  The note is
      collateralized by certain real estate assets owned by the principal shareholder
      of the Company and guaranteed by HeiLongjiang Tongli Technology Co., Ltd. The
      Company is currently in default on the loan, subject to default interest and
      penalties and is negotiating new terms with the bank.  As of September 30,
      2008, the bank has not taken any action against the Company.





**9.**
            **INCOME
                TAXES**





No
      provision for income taxes is required as a result of the utilization of net
      operating loss carry-forwards. Had carry-forwards not been available, the
      Company would have incurred income tax expense of approximately $347,000 and
      $17,000 for the six months ended September 30, 2008 and 2007,
      respectively.





As
      of
      September 30, 2008, the Company has net operating loss carry-forwards in China
      of approximately $736,000 which expire between 2008 and 2013.





The
      Company has a deferred tax asset resulting from tax loss carry-forwards of
      approximately $236,000 and $555,000 as of September 30, 2008 and March 31,
      2008,
      respectively, for which the Company has provided a 100% valuation
      allowance.




**10.**
            **COMMITMENTS
                AND CONTINGENCIES**





The
      Company entered into agreements with three distributors to provide agreed upon
      amounts of products at pre-agreed pricing through March 2011.   In the
      event a distributor does not purchase a fixed percentage of the agreed upon
      amounts for three consecutive months, the Company may cancel the agreement.
       In addition, one agreement provides, among other things, that the
      distributor can become the exclusive distributor for a geographical area if
      certain sales targets are met.





Since
      June 2007, HTP leased a portion of its facility to a pharmaceutical college
      at a
      monthly rental of approximately $13,400 (RMB 100,000). At March 31, 2008,
      approximately $94,000 of rents were unpaid due to the school’s limited revenues
      and the Company has recorded 100% reserve against this receivable. During the
      six months ended September 30, 2008, the Company received rents of $101,300
      (RMB
      700,000) and recorded the amount as rental income. As of September 30, 2008,
      approximately $73,000 of rents were unpaid and the Company has recorded 100%
      reserve against this receivable due to the continued uncertainty of
      collection.





***Vulnerability
      due to Operations in PRC***





The
      Company’s operations may be adversely affected by significant political,
      economic and social uncertainties in the PRC.  Although the PRC government
      has been pursuing economic reform policies for more than twenty years, no
      assurance can be given that the PRC government will continue to pursue such
      policies or that such policies may not be significantly altered, especially
      in
      the event of a change in leadership, social or political disruption or
      unforeseen circumstances affecting the PRCs political, economic and social
      conditions.  There is also no guarantee that the PRC government’s pursuit
      of economic reforms will be consistent or effective.





Substantially
      all of the Company’s businesses are transacted in RMB, which is not freely
      convertible.  The Peoples Bank of China or other banks are authorized to
      buy and sell foreign currencies at the exchange rates quoted by the Peoples
      Bank
      of China.  Approval of foreign currency payments by the Peoples Bank of
      China or other institutions requires submitting a payment application form
      together with suppliers’ invoices, shipping documents and signed
      contracts.





Since
      the
      Company has its primary operations in the PRC, the majority of its revenues
      will
      be settled in RMB, not U.S. Dollars. Due to certain restrictions on currency
      exchanges that exist in the PRC, the Company’s ability to use revenue generated
      in RMB to pay any dividend payments to its shareholders outside of China may
      be
      limited.





The
      Company’s business depends on maintaining licenses of its current products from
      the China State Food and Drug Administration.  Obtaining licenses for
      additional products can be expensive and is usually time consuming.
 Failure to obtain the necessary licenses when needed can cause the
      Company’s business plan to be delayed.  If the delays prevent the Company
      from generating positive cash flow or introducing a significant number of
      products, there will be a material adverse effect on the Company.





In
      September 2006, PRC changed the laws regarding transfer of equity in PRC
      companies in exchange for equity in non-PRC companies.  Approvals and
      registrations for such transfers are required and penalties may be imposed
      if
      the requirements are not met.


9





**ITEM
      2 –
      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATION**





**** The
      following discussion and analysis of our financial condition and results should
      be read in conjunction with the information contained in the audited
      consolidated financial statements for the years ended March 31, 2008 and 2007and
      the notes thereto included in our Form 8K filed on July 30, 2008.





As
      used
      in this report, the terms “Company,” “we,” “our,” “us” and “TP” refer to Tongli
      Pharmaceuticals (USA), Inc. and its subsidiaries, a Delaware
      corporation.





*Preliminary
      Note Regarding Forward-Looking Statements*





This
      report contains forward-looking statements within the meaning of the federal
      securities laws. These include statements about our expectations, beliefs,
      intentions or strategies for the future, which we indicate by words or phrases
      such as “plan”, “anticipate,” “expect,” “intend,” “will,” “we believe,” “TP
      believes,” “management believes” and similar language. The forward-looking
      statements are based on the current expectations of management and are subject
      to certain risks, uncertainties and assumptions, including those set forth
      in
      the discussion under “Management’s Discussion and Analysis of Financial
      Condition and Results of Operations” in this report. Actual results may differ
      materially from results anticipated in these forward-looking statements. We
      base
      the forward-looking statements on information currently available to us, and
      we
      assume no obligation to update them.





***Company
      Overview***





Tianmu
      Pharmaceuticals Co, Ltd., our subsidiary, has been developing pharmaceutical
      and
      health care products that incorporate elements of Chinese Traditional Medicine
      with elements of Western Medicine. Our research and development activities
      have
      been carried out at relatively low cost because they have been carried out
      in
      concert with a number of research institutes and universities, including the
      Jilin Research Institute of Chinese Traditional Medicine, the Sichuan Research
      Institute of Chinese Material
      Medica, the Heilongjiang Institute of Chinese Traditional Medicine, the
      Chemistry Department of Tsinghua University, and the R&D Center of Harbin
      Medical University.




*Products*




As
      a
      result of our efforts, we now offer health care products in several distinct
      categories, including:




**§**
            **Antihyperlipidemics.**These
                tablets, based on principles of Chinese Traditional Medicine, are
                used to
                reduce cholesterol levels and soften blood vessels in order to improve
                circulation.  Our antihyperlipidemics are offered as an affordable
                alternative to the statins commonly used for this purpose in Western
                Medicine.




**§**
            **Yufang
                Anti-Bacterial Mouthwash.**Comprised
                of a mixture of medicinal ingredients that counter disease and odor
                in the
                oral cavity and throat, Yufang Mouthwash is designed to purge bad
                breath
                caused by gum disease, abnormal sleep, nervousness, food, alcohol
                and
                smoking.  We package Yufang Mouthwash in bottles that are small
                enough to be carried conveniently, and we target customers who are
                travelling or away from home.  Our primary points of distribution for
                Yufang Mouthwash have been restaurants and transport
                carriers.




**§**
            **Calcium
                Gluconate Oral Liquid**.
                 This is a calcium supplement used for the prevention and treatment
                of diseases caused by calcium deficiency, such as osteoporosis, bone
                hypoplasis, and Rickets.  The liquid is particularly recommended for
                women during menopause or lactation.  The National Nutrition Survey
                conducted by the government of China indicated that the average calcium
                intake among the population of China is less than half of the recommended
                800 milligrams.  This indicates a broad potential market for our
                product, in which we will have the advantage of carrying a pharmaceutical
                license number, which is considerably more authoritative than the
                health
                license numbers under which most of our competitors market their
                calcium
                supplements.




**§**
            **Leucorrhea
                Relief Tablet**.
                 Based on Chinese Traditional Medicine, this compound is designed
                to
                reduce leucorrhea (vaginal discharge).  It is also believed to
                provide relief from chronic cervicitis, endometritis, colpitis and
                other
                vaginal inflammations.




10





**§** **Arrhythmia
      Relief Tablet.** Based
      on Chinese Traditional Medicine, our anti-arrhythmia medication is designed
      to
      provide relief from irregular heart rate and the attendant palpitations and
      dizziness.  The product is particularly effective in treating
      atrioventricular premature beat.




**§** **Artery
      Cleansing Oral Liquid** .
       Based on Chinese Traditional Medicine, this compound is designed to
      improve blood circulation by clearing arteries.  The product can be used in
      treatment of anoxemic cardiovascular and cerebrovascular disease, as well as
      hypertension and arteriosclerosis.




**§** **Panax
      and Radix Polygoni Capsule** .
       This compound is believed to improve blood function and replenish the
      strength of the liver and kidneys.  By revitalizing these cleansing organs,
      Traditional Chinese Medicine seeks to allay the symptoms of neurasthenia caused
      by mental or physical fatigue.





We
      have
      also developed a number of products that are ready for commercialization, when
      our working capital is adequate:




§
            Broad-Spectrum
                Disinfectant.  We developed this product for use in the prevention of
                communicable diseases, such as Hepatitis B, bird flu and SARS.  We
                will require approximately 29 million RMB ($4.25 million) to expand
                our
                plant and acquire the machinery and inventory necessary to introduce
                this
                product to the market.





*Manufacturing*




We
      constructed our manufacturing and warehouse facilities in the Limin
      Pharmaceutical Technology Park in the City of Harbin.  Our entire site was
      constructed in compliance with Chinese State Drug Administration GMP standards,
      at a total construction cost of 50 million RMB (approx. $7.3 million), with
      a
      goal of achieving world class standards.  In recognition of our
      accomplishment, our manufacturing facility has received the National Drug GMP
      (Good Manufacturing Practices) Certification, which is necessary in order to
      carry on pharmaceutical manufacturing in the PRC.  We have also received
      certifications from the International Organization for Standardization:
 specifically, ISO9001:2000 International Quality Management System
      Certification and ISO14001 Environmental Management System
      Certification.





At
      the
      present time, our manufacturing facility has the capacity to produce an annual
      output of products with a sales value over 100 million RMB (approximately
      $14,470,000).  We expect this to be adequate for at least the next two
      years.  In the meantime, however, we have budgeted $3.5 million for capital
      investment, in order to expand our capacity and this will require that we obtain
      additional capital.  At present, we have received no commitment for the
      necessary capital.





*Raw
      Materials*




We
      have
      developed purchasing relationships with a considerable number of suppliers,
      and
      have multiple sources for most of the raw materials that it requires.  Our
      business would not be significantly damaged by the loss of any one supplier.





A
      considerable portion of the raw materials that we require are volatile herbs,
      which have a brief shelf life.  This situation imposes a risk on our
      suppliers, who will often grow to order in order to insure an immediate market
      for their herbs.  The situation also necessitates that we assure ourselves
      that our raw material requirements are available precisely when needed.  To
      satisfy these conditions, it is our practice to make substantial cash advances
      to our suppliers in order to lock-in our raw material requirements. However,
      unless we develop proprietary sources of raw material supplies, the payment
      schedule for our supplies will continue to have a negative effect on our working
      capital.





*Marketing*




We
      currently market exclusively within the PRC.  Our distribution network is
      comprised of our own direct sales personnel as well as a network of authorized
      distribution agents.  Currently our sales network includes:




§ 26
      regional distribution agents;




§ over
      200
      city and county level distribution agents;




11


§ three
      national distributors, each of whom has the exclusive right to market one or
      more of our products if certain designated sales targets are achieved.  For
      example, we have given Jilin Province San Yuan Medical Ltd. the exclusive right
      to market our Calcium Gluconate Oral Solution and our Clindamycin Hydrochloride
      Capsule nationwide through March 2011 if it purchases certain designated minimum
      quantities of each product.




§ The
      Harbin Passenger Transportation Agency, which sells our mouthwash on 20 of
      its
      inter-city train routes.





We
      also
      market online through the “China Flagship Medicine Net,” a consortium Website
      that offers subscribers medical information services and an online purchasing
      platform.




*Intellectual
      Property and Government Regulation*




Because
      our manufacturing facility has earned the National GMP Certification, we are
      authorized to produce products in four modes:  tablets, capsules, granules,
      and oral suspensions.  However, in order to market our products, we require
      a license specific to each product.  The more readily available license is
      for “health care products,” which are governed by the Heilongjiang Province
      Public Health Bureau. We have registered our Yuxiang Anti-Bacterial Mouthwash
      with this Bureau.




In
      order
      to market our products as pharmaceuticals, we are required to obtain a license
      specific to each product from the State Food & Drug Administration.
 The process of obtaining such licenses is rigorous, requiring considerable
      testing.  On average, it costs us approximately 1 million RMB
      (approximately $150,000) to submit a product for approval by the SFDA.  To
      date, we have obtained the pharmaceuticals license for the
      following:




§ Sophora
      Flavescens Ait Tablets




§ Tong
      Mai
      Oral Solution




§ Calcium
      Gluconate Oral Solution




§ Benorilate
      Tablets




§ Metformin
      Hydrocloride Tablets




§ Clindamycin
      Hydrocloride Capsules




§ Ginseng
      Polygonum Capsules




§ Jiang
      Zhi
      Ning Granules




§ Povidone
      Iodine Tablets




Our
      product protection primary depends on our tradename and reputation.  For
      that reason, we have registered “Tianmu” as our trademark in China.  In
      addition, we have obtained a patent in China that covers the method of applying
      blue polyethylene packaging to the bottles of our Calcium Gluconate Oral
      Solution.




*Competition*




China’s
      domestic pharmaceutical industry is highly competitive, with hundreds of
      companies vying to reach consumers through more than 100,000 pharmacies.
 In some categories in which we compete, there are more than twenty other
      companies offering a competitive product.  The market continues to attract
      new entrants because the per capita medicine consumption in China is still
      low,
      relative to developed countries, which holds a promise of substantial
      growth.




Our
      strategies for establishing a significant market share include:




§ Leveraging
      the prestige of the Limin Pharmaceutical Zone to develop a strong customer
      base
      in China’s northeast.




12


§
            Advertise
                the demonstrated efficacy of Tianmu Pharmaceutical’s product.  We
                have extensively tested our products and can cite studies that demonstrate
                the value of many of them.  This contrasts with a large portion of
                the over-the-counter pharmaceutical market in China, which is
                characterized by unproven products.




§
            Our
                investment in a state-of-the-art facility had gained our company
                a good
                reputation in the Chinese medical field, allowing us access to researchers
                at a number of prestigious medical institutions.  Our advertising
                will highlight these associations, thus adding to the prestige of
                our
                products.




*Employees*




We
      currently employ approximately 100 employees, all of whom are employed on a
      full-time basis.  60% of our employees are involved in technical and
      scientific activities.  80% of our employees have received college or
      university education.




*Properties*




The
      executive offices and manufacturing facilities in PRC are located in the Limin
      Pharmaceutical Technology Park in the City of Harbin, which is the capital
      of
      Heilongjiang Province.  We have a 50 year lease from the government of
      China to use 50,000 square meters of land for manufacturing purposes.
 Currently our offices and manufacturing facility occupy 15,000
      m 2 ,
      and our
      warehouse occupies another 1,800 m 2 .




Our
      facilities are currently underutilized, due to our lack of working capital.
       For that reason we have subleased a portion of our facility to a
      pharmaceutical college, which is required to pay a monthly rental of $13,400.
      During the six months ended September 30, 2008, we received rental income
      totaling approximately $101,300 (RMB 700,000).  If we are able to obtain
      the capital needed to expand our operations, the space now occupied by the
      college will be available to us.  We believe, therefore, that our property
      is sufficient for our operations for the foreseeable future.





***Critical
      Accounting Policies and Estimates***





This
      section should be read together with the accounting policies included in the
      consolidated financial statements included in our audited consolidated financial
      statements for the years ended March 31, 2008 and 2007 in our Form 8-K filed
      with the Securities and Exchange Commission on July 30, 2008.





*Uses
      of estimates in the preparation of financial statements*





The
      preparation of our financial statements in conformity with generally accepted
      accounting principles requires us to make estimates and assumptions that affect
      the reported amounts of assets and liabilities and disclosure of contingent
      assets and liabilities at the date of our financial statements and the reported
      amounts of net revenue and expenses during each reporting period.  Actual
      results could differ from those estimates.





*Inventories*





Inventories
      are stated at the lower of cost, determined using the weighted average cost
      method, and net realizable value.  Costs include materials, labor and
      manufacturing overhead.  Net realizable value is the estimated selling
      price, in the ordinary course of business, less estimated costs to complete
      and
      dispose.





*Advances
      to Suppliers*





We
      make
      advances to certain vendors for purchase of our material. The advances to
      suppliers are interest free.





*Property
      and equipment*





Property
      and equipment are recorded at cost.  Depreciation is provided in amounts
      sufficient to amortize the cost of the related assets over their useful lives
      using the straight line method for financial reporting purposes.





We
      obtained the right to use a parcel of land on which our office and production
      facilities in PRC are situated.  Pursuant to the contract from the local
      government of the PRC, the contract expires in 2051.




Maintenance,
      repairs and minor renewals are charged to expense when incurred.
 Replacements and major renewals are capitalized.


13





*Currency
      translation*





Since
      we
      operate primarily in the PRC, our functional currency is the Chinese Yuan
      (”RMB”).  Revenue and expense accounts are translated at the average rates
      during the period, and balance sheet items are translated at year-end rates.
       Translation adjustments arising from the use of differing exchange rates
      from period to period are included as a separate component of shareholders’
equity.  Gains and losses from foreign currency transactions are recognized
      in current operations.





The
      RMB
      is not freely convertible into foreign currency and all foreign exchange
      transactions must take place through authorized institutions. No representation
      is made that the RMB amounts could have been, or could be, converted into USD
      at
      the rates used in translation.





*Revenue
      Recognition*





We
      recognize revenue at the date of shipment to customers when a formal arrangement
      exists, the price is fixed or determinable, the delivery is completed, and
      no
      other significant obligations by us exist and collectibility is reasonably
      assured.  Payments received before all of the relevant criteria for revenue
      recognition are satisfied are recorded as advances from customers.





*Income
      (loss) per common share*





Basic
      income (loss) per common share amounts are computed by dividing net income
      (loss) by weighted-average common stock shares outstanding during the period.
       Diluted income per common share are calculated using weighted-average
      common stock shares outstanding, adjusted for the dilutive effect of shares
      issuable upon the assumed exercise of common stock equivalents.  As of
      September 30, 2008 and 2007 there were no common stock equivalents
      outstanding.





*Comprehensive
      income*





Comprehensive
      income is defined to include all changes in equity except those resulting from
      investments by shareholders and distributions to shareholders.  Among other
      disclosures, all items that are required to be recognized under current
      accounting standards as components of comprehensive income are required to
      be
      reported in a financial statement that is presented with the same prominence
      as
      other financial statements.  Comprehensive income includes net income and
      the foreign currency translation gain, net of tax.





*Segment
      reporting*





Statement
      of Financial Accounting Standards No. 131 (“SFAS 131”), *“Disclosure
      about Segments of an Enterprise and Related Information* ”
      requires use of the “management approach” model for segment reporting.  The
      management approach model is based on the way a company’s management organized
      segments within the company for making operating decisions and assessing
      performance.  Reportable segments are based on products and services,
      geography, legal structure, management structure, or any other manner in which
      management disaggregates a company.  SFAS 131 has an immaterial effect on
      our financial statements, as our business consists of one reportable business
      segment.  All revenue is from customers in the PRC.  Substantially all
      of our assets are located in the PRC.





***New
      Accounting Pronouncements***





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      (SFAS) No. 157, “ *Fair
      Value Measurements* ”
(SFAS
      157).  This statement defines fair value, establishes a framework for
      measuring fair value in generally accepted accounting principles, and expands
      disclosures about fair value measurements. We
      adopted the provisions of SFAS 157 on April 1, 2008. SFAS 157 is applicable
      whenever another accounting pronouncement requires or permits assets and
      liabilities to be measured at fair value. SFAS 157 does not expand or require
      any new fair value measures; however the application of this statement may
      change current practice. In February 2008, the FASB decided that an entity
      need not apply this standard to nonfinancial assets and liabilities that are
      recognized or disclosed at fair value in the financial statements on a
      nonrecurring basis until fiscal years beginning after November 15, 2008.
      Accordingly, our adoption of this standard in 2008 was limited to financial
      assets and liabilities. The
      adoption of SFAS No. 157 did not have a material effect on our results of
      operations, cash flows or financial position.


14





In
      February 2007, the FASB issued FASB Statement No, 159, “ *The
      Fair Value Option for Financial Assets and Liabilities*  *-
      including an amendment of FASB Statement No. 115”* (FAS
      159).  FAS 159 became effective for the Company on April 1, 2008.
 This standard permits companies to choose to measure many financial
      instruments and certain other items at fair value and report unrealized gains
      and losses in earnings.  We elected not to adopt the fair value option for
      valuation of those assets and liabilities which are eligible under this
      statement and therefore there was no impact to our results of operations, cash
      flows or financial position.





In
      December 2007, the FASB issued SFAS No. 141(R), *Business Combinations* ,
      and
      SFAS No. 160, *Non-controlling Interests in Consolidated Financial Statements* .
       SFAS 141 (R) requires an acquirer to measure the identifiable assets
      acquired, the liabilities assumed, and any non-controlling interest in the
      acquiree at their fair values on the acquisition date, with goodwill being
      the
      excess value over the net identifiable assets acquired.  SFAS No. 160
      clarifies that a non-controlling interest in a subsidiary should be reported
      as
      equity in the consolidated financial statements.  SFAS No. 141 (R) and SFSS
      No. 160 are effective for financial statements issued for fiscal years beginning
      after December 15, 2008.  Early adoption is prohibited.  We have not
      yet determined the effect on our financial statements, if any, upon adoption
      of
      SFAS No. 141 (R) or SFAS No. 160. SFAS 141 (R) will significantly affect the
      accounting for future business combinations and we will determine the accounting
      as new combinations are determined.





EITF
      Issue 07-1, *Accounting for Collaborative Arrangements Related to the Development and
      Commercialization of Intellectual Property* is
      effective for financial statements issued for fiscal years beginning after
      December 15, 2008.  This issue addresses the income statement
      classification of payments made between parties in a collaborative arrangement.
 The adoption of EITF 07-1 is not expected to have a significant impact on
      our current results of operations, cash flows or financial
      position.




***Results
      of Operations***





We obtained
      our GMP Certification and pharmaceutical licenses in 2005.  Our focus for
      the next two years is on developing our marketing efforts. Our sales began
      only
      near the end of our fiscal year that ended on March 31, 2008. The results of
      our
      operation for the three and six months ended September 30, 2008 compared to
      the
      prior comparative periods are as follows:





***Three
      Months Ended September 30, 2008 compared to Three Months Ended September 30,
      2007***





*Revenues,
      cost of sales and gross profit*





Revenues
      increased 298.4% to approximately $1.6 million for the three months ended
      September 30, 2008 from approximately $0.4 million for the three months ended
      September 30, 2007. The $1.2 million increase was mainly attributable to the
      increase in sales of our product Artery Cleansing Oral Liquid supported by
      our
      marketing efforts, increasing brand recognition and effective pricing strategy
      and our distribution to previously unaddressed market.





Cost
      of
      sales was approximately $0.9 million for the three months ended September 30,
      2008 compared to $0.2 million for the three months ended September 30,
      2007. Expressed as a percentage of revenues, cost of sales sold was 56.3% for
      the three months ended September 30, 2008, compared to 57.1% for the three
      months ended September 30, 2007. The decrease in cost of sales as a
      percentage of revenues was mainly attributable to lower cost of sales of our
      product Artery Cleansing Oral Liquid.





Gross
      profit was approximately $0.7 million for the three months ended September
      30,
      2008 compared to $0.2 million for the three months ended September 30, 2007.
      Gross profit as a percentage of revenues increased to 43.7% in the three months
      ended September 30, 2008 compared to 42.9% in the comparable period of the
      prior
      year due to the higher gross margins related to our product Artery Cleansing
      Oral Liquid.




15


*Operating
      expenses*





Total
      operating expenses increased to approximately $0.2 million for the three months
      ended September 30, 2008 from $0.1 million for the three months ended September
      30, 2007. As a percentage of revenues, operating expenses decreased to 14.5%
      for
      the three months ended September 30, 2008 compared to 29.4% for the three months
      ended September 30, 2007. The $0.1million increase in total operating expenses
      was due to the increase in salaries resulting from additional personnel needed
      by our growth and professional fees included in general and administrative
      expense.





*Interest
      expense*





Net
      interest expense was $51,839 for the three months ended September 30, 2008
      compared to $28,385 for the three months ended September 30, 2007. The increase
      of $23,454 in net interest expense for the three months ended September 30,
      2008
      was because of higher interest on our bank loan and interest expense related
      to
      our loan to related parties.





***Six
      Months Ended September 30, 2008 compared to Six Months Ended September 30,
      2007***





*Revenues,
      cost of sales and gross profit*





Revenues
      increased 328% to approximately $3.3 million for the six months ended September
      30, 2008 from approximately $0.8 million for the six months ended September
      30,
      2007. The $2.5 million increase was mainly attributable to the increase in
      sales
      of our product Yufang Anti-Bacterial Mouth Wash supported by our marketing
      efforts, increasing brand recognition and effective pricing strategy and our
      distribution to previously unaddressed market.





Cost
      of
      sales was approximately $1.9 million for the six months ended September 30,
      2008
      compared to $0.5 million for the six months ended September 30, 2007.
      Expressed as a percentage of revenues, cost of sales decreased to 57.3% for
      the
      six months ended September 30, 2008, compared to 57.5% for the six months ended
      September 30, 2007. The decrease in cost of sales as a percentage of
      revenues was mainly attributable to higher cost of sales of our Yufang
      Anti-Bacterial Mouth Wash.





Gross
      profit was approximately $1.4 million for the six months ended September 30,
      2008 compared to $0.3 million for the six months ended September 30, 2008.
      Gross
      profit as a percentage of revenues increased to 42.7% in the three months ended
      September 30, 2008 compared to 42.5% in the comparable period of the prior
      year
      due to higher gross margins related to our Yufang Anti-Bacterial Mouth Wash
      product.





*Operating
      expenses*





Total
      operating expenses increased to approximately $0.4 million for the six months
      ended September 30, 2008 from $0.2 million for the six months ended September
      30, 2007. As a percentage of revenues, operating expenses decreased to 13.2%
      for
      the six months ended September 30, 2008 compared to 29.8% for the six months
      ended September 30, 2007. The $0.2 increase in total operating expenses was
      principally due to increase in salaries and professional fees included in our
      general and administrative expense.





*Interest
      expense*





Net
      interest expense was $86,916 for the six months ended September 30, 2008
      compared to $49,007 for the six months ended September 30, 2007. The increase
      in
      net interest expense for the six months ended September 30, 2008 was because
      of
      increased interest expense on our bank loan and amounts due to related
      parties.





***Liquidity
      and Capital Resource***




The
      development of our business through September 30, 2008 resulted in an
      accumulated deficit of $888,608.  We funded that deficit by means of a bank
      loan and loans from the members of our management and entitites related to
      our
      Chairman.  While the recent six months ended September 30, 2008 was
      profitable, the funding of our operations left us at September 30, 2008 with
      a
      working capital deficit of approximately $1,438,583.




Included
      among our current liabilities at September 30, 2008 was a note payable to our
      bank in the amount of $1,009,216 (RMB 6,918,273).  The note is
      collateralized by real estate assets owned by our Chairman.  The note has
      been in default since June 30, 2007, and we are negotiating a refinance of
      the
      note.   To date the bank has not taken any action against the Company.




16


Our
      need
      to have raw materials available when needed causes us to advance cash to
      suppliers.  This drain on our cash will remain unless we secure a
      proprietary source of the volatile herbs that are a large portion of our raw
      materials.




The
      growth of our company will require capital.  Currently we have budgeted
      $3.5 million for capital improvements. We intend to pursue a two prong search
      for capital:  on the one hand seeking debt to be secured by our facility
      and equipment, which has a book value of $7.2 million and is free of liens;
      on
      the other hand approaching international equity markets for debt or equity
      investments.  To date we have no commitment from any source for the funds
      we require.





*Cash
      Flow*





Cash
      flows provided by operating activities during the six months ended September
      30,
      2008 amounted to $846,369, which consists of our net income of $992,021
      increased by noncash adjustments of $202,306 and offset by changes in operating
      assets and liabilities of $347,958. Cash flows provided by operating activities
      in the six months ended September 30, 2007 amounted to $346,389, which consist
      of our net income of $49,665 increased by noncash adjustments of $178,249 and
      changes in operating assets and liabilities of $118,475. Cash flows from
      operations during the six months ended September 30, 2008 increased by $499,980
      or 144% compared with to the same period of 2007. The increased cash flow was
      due primarily to the increase in our net income by $942,021.





Our
      cash
      flows used in investing activities amounted to $907,508 in the six months ended
      September 30, 2008, which consist of payment to acquire patent right of
      $1,025,514, payment for a portion of cost of Aim Smart of $276,000 and purchase
      of property and equipment of $661, offset by proceeds from refund of deposits
      related to terminated acquisitions of $394,667. Cash flows used in investing
      activities amounted to $496,787 in the six months ended September 30, 2007,
      which consist of acquisition of property and equipment of $417,188 and deposits
      paid relating to planned acquisitions of $76,669. Cash flows used in investing
      activities in the six months ended September 30, 2008 increased by $410,630
      or
      83% compared to the same period in 2007.





Our
      cash
      flows provided by financing activities amounted to $56,723 in the six months
      ended September 30, 2008, which consist of proceeds from related party advances
      of $64,622 offset by payment of our bank loan by $7,899. Cash flows provided
      by
      financing activities amounted to $164,890 in the six months ended September
      30,
      2007, which consist of proceeds from related party advances of $176,977 offset
      by payment of our bank loan by $12,087. Cash flows provided by financing
      activities decreased by $108,167 or 66% compared to the same period in
      2007.





***Off-Balance
      Sheet Arrangements***





The
      Company does not have any off-balance sheet arrangements that have or are
      reasonably likely to have a current or future effect on our financial condition
      or results of operations.





*Issuance
      of Common Stock*





On
      August
      12, 2008, the Company (formerly American Tony) completed a reverse merger with
      Aim Smart Corporation (“Aim Smart”), a dormant public shell. Under
      the
      terms of the merger agreement, the former American Tony shareholders exchanged
      their shares for Aim Smart shares so that, upon the closing of the merger,
      the
      former American Tony shareholders owned 96.7% of the outstanding shares of
      Aim
      Smart. Aim Smart changed its name to American Tony prior to the change to
      TP.





In
      June
      2008, the Company issued 70,000 shares of common stock to two newly appointed
      independent directors with a value $17,500.





*Inflation*





Inflation
      has not had a material impact on our business and we do not expect inflation
      to
      have a material impact on our business in the near future.





*Currency
      Exchange Fluctuations*





We
      operate primarily in the PRC and the functional currency of our operating
      subsidiary is the Chinese Yuan (”RMB”).  The RMB is not freely convertible
      into foreign currency and all foreign exchange transactions must take place
      through authorized institutions. No representation is made that the RMB amounts
      could have been, or could be, converted into USD at the rates used in
      translation.


17





All
      of
      the Company’s revenues and a majority of its expenses in the six months ended
      September 30, 2008 and 2007 were denominated in RMB and were converted into
      US
      dollars at the average exchange rate of 6.9109 RMB to 1USD for the six months
      ended September 30, 2008 and at the average exchange rate of 7.6780 RMB to
      1USD
      for the six months ended September 30, 2007.




**ITEM
      3 - QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





Not
      required.




**ITEM
      4 - CONTROLS AND PROCEDURES**




We
      maintain “disclosure controls and procedures,” as such term is defined under
      Exchange Act Rule 13a-15(e), that are designed to ensure that information
      required to be disclosed in our Exchange Act reports is recorded, processed,
      summarized, and reported within the time periods specified in the SEC’s rules
      and forms, and that such information is accumulated and communicated to our
      management, including our Chief Executive Officer and Principal Financial
      Officer, as appropriate, to allow timely decisions regarding required
      disclosures. In designing and evaluating the disclosure controls and procedures,
      our management recognized that any controls and procedures, no matter how well
      designed and operated, can provide only reasonable assurance of achieving the
      desired control objectives and in reaching a reasonable level of assurance
      our
      management necessarily was required to apply its judgment in evaluating the
      cost-benefit relationship of possible controls and procedures. We have carried
      out an evaluation as required by Rule 13a-15(d) under the supervision and with
      the participation of our management, including our Chief Executive Officer
      and
      Principal Financial Officer, of the effectiveness of the design and operation
      of
      our disclosure controls and procedures as of September 30, 2008. Based upon
      their evaluation and subject to the foregoing, the Chief Executive Officer
      and
      Principal Financial Officer concluded that as of September 30, 2008 our
      disclosure controls and procedures were effective in ensuring that material
      information relating to us, is made known to the Chief Executive Officer and
      Principal Financial Officer by others within our company during the period
      in
      which this report was being prepared.




There
      were no changes in our internal controls over financial reporting identified in
      connection with the evaluation that occurred during the quarter ended September
      30, 2008 that has materially affected, or is reasonably likely to materially
      affect, our internal controls over financial reporting.




18


**PART
      II**




**OTHER
      INFORMATION**




**ITEM
      1** **LEGAL
      PROCEEDINGS**




None.




**ITEM
      1A**  **RISK
      FACTORS**




As
      a
      smaller reporting company, the Company is not required to make disclosures
      under
      this Item 1A.




**ITEM
      2A**  **UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**




Not
      applicable.




**ITEM
      3**  **DEFAULTS
      UPON SENIOR SECURITIES**




None.




**ITEM
      4**  **SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS**




None.




**ITEM
      5**  **OTHER
      INFORMATION**




None.




**ITEM
      6**  **EXHIBITS**





**Exhibit
                No.**
            
            **Description**31.1
            
            Certification
                of the Chief Executive Officer (Principal Executive Officer) pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 2002.31.2
            
            Certification
                of the Chief Financial Officer (Principal Financial Officer) pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 2002.32.1
            
            Certification
                Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002




19


**ITEM
      7** **SIGNATURES**




**SIGNATURES**




In
      accordance with the requirements of the Securities Exchange Act of 1934, the
      registrant caused this report to be signed on its behalf by the undersigned,
      thereunto duly authorized.




Tongli
                Pharmaceuticals (USA), Inc.Dated:
                November 13, 2008
            By:
            /s/
Yao
              MingliName:
                Yao MingliTitle:
                Chief Executive OfficerBy:
            /s/
Yao
              YuanName:
                Yao YuanTitle:
                Chief Financial Officer




20